Farm income expected to dip from last year's highs

ST. LOUIS – After a record 2011 that saw farm incomes soar, the coming season will likely be a downer, according to a University of Missouri economist.
This past year was record-setting, with farm income topping $100 billion for the first time ever, making the agricultural economy one of the bright spots in a wobbly economy. Limited grain stocks, bad weather in some parts of the country and demand from overseas all factored into the numbers.
“We had a lot of things come together to push commodity prices higher,” said Pat Westhoff, of the University of Missouri Food and Agricultural Policy Research Institute. “It was a pretty good story overall.”
Livestock farmers did well, too, Westhoff said, after slow sales in 2009 and 2010, when demand for meat dropped with the slowing economy. Growing demand for protein from developing markets in Asia was a major influence in the rebound, as were drought conditions in Texas, which triggered feed prices – therefore, protein prices – to soar.
“We’re seeing a bit stronger demand for our meat overseas and at the same time we’ve got less supply,” Westhoff said. “Events like the Texas drought have reduced cattle numbers, so there will be less beef to be sold in 2012. That will help keep cattle prices high ahead of us for the next several years.”
In 2011, farm income rose 28 percent above 2010, according to the U.S. Department of Agriculture. Exports totaled more than $137 billion, with crop and livestock sales rising 16 and 17 percent over 2010 respectively.
“Prices are up across the board for all the major crops, and while we’ve seen cost of production increases overall, they haven’t increased as rapidly as the prices of crops people were selling,” Westhoff said. “Even corrected for inflation, farm profits are at or near the highest levels since the 1970s.”
But if weather conditions are normal in the coming season, prices could flatten out a little.
“We could have bigger crop supplies if we have a normal year,” Westhoff said. “But I still expect a lot of volatility, especially with corn stocks so tight.”